District to withhold tax cushion

By Joseph T. O’Connor EBS Managing Editor

BIG SKY – Homeowners in Big Sky’s Water and Sewer District will divvy out more money and assume the full debt service to pay back state loans this tax year.

Combined water and sewer mill rates on the 2015 property tax levy are projected to increase by approximately 27.8 percent– or about 13 mills using 2014 evaluations – one of the highest relative increases in the last decade. Gallatin and Madison counties will send the Department of Revenue’s certified taxable values for 2015 in the next week, according to BSWSD General Manager Ron Edwards, which will be used to determine the final mill rate.

But even though district homeowners voted in 2001 and 2006 to approve the debt service for nearly $27 million in state water and sewer loans, they’ve never actually felt the brunt of that cost in the district – until now.
The mill increase is in part due to a $300,000 holdout this year from BSWSD, which since 2007 has annually apportioned money from its wastewater reserve fund to level out the mills. A mill is equal one thousandth of a dollar, and the rate fluctuates based on state-assessed property values.

“We’ve been controlling how much the mill rate has been by subsidizing it with restricted funds from the district,” Edwards said, referring to the reserve fund it has set aside for sewer-related spending. “So in the past we’ve [used] our money to go toward bond debt, which effectively lowers how much the mill rate needs to be.”

For its part, Edwards says BSWSD helped soften the blow by refinancing the state loans in 2013, lowering interest rates from 3.75 to 2.25.

“Total payments have gone down since we refinanced, which is ultimately saving taxpayers close to $2 million [per year],” he said.

At a May 26 meeting of the BSWSD board, its members decided not to dip into $2.9 million it holds in restricted funds, which it’s saving for sewer plant upgrades as the need arises.

Called the Plant Investment Reserve Fund, this money is earmarked for sewer-related investments as opposed to water-related expenditures. It comes from a one-time, $3,500 Plant Investment Charge per single-family equivalent that’s imposed on homeowners building new houses when they apply for permitting.

The decision not to contribute to the tax role this year, according to Edwards, stems from a series of studies the district is implementing in order to prepare for what the BSWSD board sees as an influx of both tourists and residents of late.

“We’re back in another big upswing in growth for Big Sky,” said Edwards, BSWSD’s frontman since 1995. “And we’re in the process of looking at our infrastructure and updating our facility plans, all of which are telling us, ‘Buckle up, we’ve got some stuff ahead that we need to start planning for.’”

BSWSD-hired engineers are applying information garnered from a recently completed wastewater facilities study to a five-year Wastewater Capital Improvement Plan, which will show the board what improvements or upgrades the district will need to implement as more people use the system.

“The board saw preliminary reports from the engineers that showed multiple millions of dollars in sewer projects that will be required to meet future wastewater capacity,” said BSWSD Treasurer Terry Smith. “They’re going to have to happen. It’s just a matter of when.”

Along with BSWSD not apportioning $300,000 from its coffers this year, the mill increase, Smith says, is also due to the fact that the water and sewer board did not apply for resort tax funding to offset those increases.

Resort tax supplemented BSWSD in the past for debt service, but the Big Sky Resort Area District board of directors denied the last ask by this public works department in 2012, when the mill levy rose 26.99 percent over the previous year. Since BSWSD apportioned $300,000 to the tax roll that year, however, homeowners and businesses didn’t feel the hit. This year will be a different story.

Homeowners will receive tax bills in November notifying them of the increased mill levy, and can pay the full amount by Nov. 30, or half then and half in May 2016.